HMRC’s consultation on reforming the Terminal Markets Order (TMO) proposed to modernise the legislation that underpins the VAT treatment of certain wholesale commodity transactions. 

In its response, ICAEW’s Tax Faculty agreed that the TMO needed modernising. It was broadly supportive of HMRC’s proposed principle-based approach. This would allow the legislation to be more flexible going forward. New commodities, exchanges and markets would fall within scope of the rules automatically, without updating the primary legislation. 

However, the faculty expressed concern that a move away from published lists of qualifying commodities, exchanges and markets could lead to less certainty for taxpayers. The response encouraged the government to consider how to mitigate additional uncertainty if this approach is taken. 

The faculty also recommended that any definitions needed for TMO compliance should be contained in legislation wherever possible. 

ICAEW took the opportunity to question why a more radical overhaul of the VAT rules for commodity trading was not considered. A wider simplification is possible now that the UK has left the EU, which could provide a boost to the UK’s financial sector. 

Read ICAEW’s response.